A district court’s summary judgment ruling invalidating two claims of a patent for a bed frame as obvious and dismissing the patent owner’s claims with prejudice has been vacated by the U.S. Court of Appeals for the Federal Circuit. The district court committed reversible error by granting summary judgment to plaintiff sua ponte without providing notice to the patent owner or permitting the patent owner to present evidence or argument; relying on a prior art reference in its invalidity determination, despite a factual dispute regarding whether the reference predated the effective date of the patent-in-suit; and dismissing the patent owner’s infringement and state law claims with prejudice (Cap Export, LLC v. Zinus, Inc., January 18, 2018, Bryson, W.).

Zinus, Inc. owns U.S. Patent No. 8,931,123 ("the ’123 patent"), entitled "Assemblable mattress support whose components fit inside the headboard." The patent is directed to a bed frame made up of components that can be packed into the headboard compartment and shipped in a single box.

In January 2016, plaintiff Cap Export, LLC, filed a declaratory judgment action against Zinus in the federal district court in Los Angeles, alleging that the ’123 patent was invalid and not infringed. Zinus counterclaimed for patent infringement and unfair business practices under California state law, and added Amouyal and 4Moda Corp. as third-party defendants. At a status conference in May 2016, the district court ordered Zinus to file a motion for summary judgment of validity as to the ’123 patent and stayed discovery on all other issues. In response to Cap Export challenge to Zinus’s standing, the district court, at an August status conference, stated that all discovery would be stayed except as it related to standing. On November 29, 2016, the district court granted summary judgment in Cap Export’s favor and dismissed all of Zinus’s counterclaims and third-party claims with prejudice. The court concluded that Zinus had standing to assert the ’123 patent based on a valid assignment and that claims 1 and 2 of the ’123 patent were invalid as obvious. Zinus appealed.

The Federal Circuit vacated the district court’s summary judgment ruling, pointing to three reversible errors. The district court first erred by granting summary judgment to Cap Export sua ponte without providing notice to Zinus. Rule 56(f) of the Federal Rules of Civil Procedure provides that district courts may grant summary judgment for a non- movant only after "giving notice and a reasonable time to respond." In this case, the district court ordered Zinus to make a motion for summary judgment of validity, but provided no notice that the court was contemplating entering summary judgment of invalidity. "Normally, if a patent holder were to lose a motion for summary judgment of validity, the result would be a trial, not a judgment of invalidity," the appeals court said. The district court compounded its procedural error by failing to give Zinus a full and fair opportunity to present evidence and argument. Zinus did not have an opportunity to depose Cap Export’s expert, yet the district court relied on the expert’s testimony and found it "credible." Zinus also was denied an opportunity to present evidence of objective indicia of nonobviousness.

Second, the district court improperly dismissed Zinus’s assertion of claim 2 of the ’123 patent and Zinus’s state law claims with prejudice. As neither party raised arguments regarding the validity of claim 2, the district court erred in dismissing Zinus’s infringement allegations concerning claim 2 with prejudice. In addition, although a district court may decline to exercise supplemental jurisdiction over state law claims after dismissing federal claims, any such dismissal must be without prejudice, the Federal Circuit noted.

Finally, the district court improperly relied on the "bed in a box" website as a prior art reference in concluding that claims 1 and 3 would have been obvious, despite a factual dispute regarding whether the reference predated the ’123 patent. Zinus pointed out that the website appeared to have been posted in November 2014 (other evidence pointed to December 2103), well after the ’123 patent’s priority date of September 25, 2013. This factual dispute precluded relying on the bed in a box website for purposes of summary judgment.

The Federal Circuit vacated the district court’s grant of summary judgment of invalidity as to claims 1 and 3 of the ’123 patent and its dismissal with prejudice of Zinus’s counterclaims.

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